How Much Equity Does the Government Hold? / Alan J. Auerbach.

By:

Auerbach, Alan J

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w10291.Publication details: Cambridge, Mass. National Bureau of Economic Research 2004.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: A central point in the recent debate about Social Security in the United States has been the extent to which the federal government should take significant positions in the equity market. But, as this paper shows, the government already has a much more significant, if implicit position in the U.S. equity market through its claim to future tax revenues. Using estimates of the sensitivity of federal tax revenues to stock market returns, I calculate the implicit equity position of the federal government, defined as the equity position that would be as sensitive to the stock market as the present value of federal revenues. Although standard errors are large, point estimates indicate that the implicit federal equity position exceeds the size of the stock market itself, a result that is consistent with the fact that revenues from all sources, not just taxes on corporate source income, are responsive to stock market returns.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w10291 (Browse shelf(Opens below))	Not For Loan

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February 2004.

A central point in the recent debate about Social Security in the United States has been the extent to which the federal government should take significant positions in the equity market. But, as this paper shows, the government already has a much more significant, if implicit position in the U.S. equity market through its claim to future tax revenues. Using estimates of the sensitivity of federal tax revenues to stock market returns, I calculate the implicit equity position of the federal government, defined as the equity position that would be as sensitive to the stock market as the present value of federal revenues. Although standard errors are large, point estimates indicate that the implicit federal equity position exceeds the size of the stock market itself, a result that is consistent with the fact that revenues from all sources, not just taxes on corporate source income, are responsive to stock market returns.